Corrected: France braced for power shortage as big freeze looms

Author: Herman Moestue

2017/01/13

Corrected: The French power system looks likely to face a 1.5GW shortfall in week 3 compared with February 2012, not 3.5GW as was initially stated. A corrected article follows.

The French power system looks certain to face a shortfall of at least 1.5GW in available capacity in week 3 compared to the previous severe cold spell with comparable demand, ICIS calculations show.

The French power system looks set to be hit by an extreme squeeze if power demand reaches 101GW, traders said on Thursday, attributing the risks to diminishing capacity since 2012.

Thursday 19 January is expected to be the most critical day, with peak power demand at hour 19 Paris time expected to be 101.6GW according to grid operator RTE – just 600MW short of the previous demand record set on 8 February 2012.

Much power generation capacity has been mothballed or shut down in recent years due to tougher restrictions on coal-fired power plants as well as dwindling profits due to lower wholesale power prices.

Thermal power loss

While previous winters have been relatively mild and nowhere near the severe winter of 2012 in power demand terms, a comparison of French installed capacity at the beginning of 2012 and the start of 2017 shows that the power system has lost 5GW of coal-fired and 5.1GW of fuel oil plant. Meanwhile, around 2GW capacity from gas is likely to have been added to the grid since 2012. This translates into a loss of 10.4GW in just five years.

Taking all forms of generation into account, the total French production fleet amounted to 126.4GW in 2012, but just 104GW at the start of this year, French grid operator data showed.

In the event of demand above 100GW, the French power system is therefore likely to be severely tested, and prices will have to push high enough to attract all possible electricity imports from neighbouring markets.

“There won’t be any lights on the Eiffel tower,” said one utility-based trader active on the French market.

“Capacity in France is not the best and the neighbours will be struggling as well with the cold weather and high demand,” the trader added.

Extreme

On Thursday afternoon, the Week 3 Peaks was seen trading several times at €325.00/MWh, down from a high of €350.00/MWh ICIS trade data showed, a clear sign of nerves in the market.

The equivalent baseload product traded as high as €180.00/MWh mid-afternoon, €12.00/MWh higher than where it last traded on Wednesday, but was changing hands back at €158.00/MWh after the ICIS 17:00 Paris time close.

The panic buying initially emerged after demand forecasts for Thursday and Friday in week 3 were revised up on Wednesday afternoon in week 2. Temperatures were due to plunge to 8°C below the norm, according to RTE.

“The power system will lack a lot [of capacity],” said one utility-based trader who said he had refrained from trading due to the volatility in the market.

There was concern on Thursday that any crunch at the start of week 3 could be exacerbated when union members from generators EDF and Uniper announced their intention to strike on Monday in week 3, but typically this has had little impact on generation capacity.

A RTE spokesman said on Wednesday night that it would be able to cover demand on Monday in week 3 without having to introduce extraordinary measures, such as calling on consumers to reduce consumption. He added that it was too early to comment on weather forecasts going into week 3.

More wind, hydro

Comparing the forecast of available generation for Thursday 19 January with 8 February 2012, when the demand record was set, a shortfall of 3.5GW emerges this year when looking at nuclear, gas-, coal- and fuel oil-fired plants. This year’s figure is 69.8GW, compared to 73.3GW in 2012 (see chart).

Wind power production is likely to pick up in Germany and France from late on Tuesday night in week 3, ICIS analyst forecasts showed, rising from minimal levels to 15GW in Germany and around 5GW in France, potentially offsetting the missing thermal power. Solar is expected to add 2GW.

Also, France could possibly ramp up 4GW of smaller-scale gas-fired power plants which were not covered by the official RTE figures. Several gigawatts of co-generation and decentralised plants are likely to bring the total capacity from plants using gas as a fuel to above 10GW.

Meanwhile, hydropower reserves were less plentiful at the end of 2016 than in late 2012. Average hydro generation reached 10GW on 8 February 2012, while generation in France late on Thursday afternoon was around 7GW.

However one French trader with knowledge of hydropower production said that output could be ramped up to 12GW in the event of a severe cold snap.

Compared with installed capacity of 104GW, in total France expects on Thursday to produce: 70GW of available thermal generation, 12GW of hydro, 4GW of small-scale gas, 5GW of wind and 2GW of solar, amounting to just 93GW. It also has around 8GW of potential import capacity before extraordinary measures such as freeing up cable capacity from other systems or demand reduction are called on. herman.moestue@icis.com